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This week’s Court of Appeal decisions covered a range of subjects including contracts, torts, civil procedure, and wills and estates. A quick note of congratulations to our partners, Lou Brzezinski and Chad Kopach who successfully represented the respondents in Roopchand v Chau.

The two most notable substantive decisions this week were two wills and estates matters. In Spence v BMO Trust Co., the question was whether a bequest could be voided on public policy grounds because the disappointed heir (the daughter) alleged that the true motivation for being cut out of the will by her father was racism (she had fathered a child with a person of a different skin colour). The Court decided that it would be dangerous to go behind the stated reason of the testator in the will, which was that father and daughter had grown apart. Accordingly, the father’s decision should be respected. However, the Court went on to clearly state, albeit in obiter, that even if the father had explicitly said in his will that he was not providing for his daughter on racist grounds, that decision would still have been respected because of the common law principle of testamentary freedom. In Neuberger v York, a dispute over a $100 million dollar estate, the Court determined that the doctrine of estoppel should not apply to bar an heir (who was also a trustee and had taken steps under the will) from challenging the validity of the will.

In April 2008, the respondent electricity provider entered into a fixed price electricity supply contract with the appellant. The appellant subsequently sued the respondent for a declaration that the contract was rescinded and damages for negligence and negligent misrepresentation. At trial, the judge accepted the evidence of the respondent that the appellant wanted to contain its costs and have predictable costs going forward that the appellant could accurately budget for and that would avoid the need to worry about the fluctuations in those costs. In accepting the evidence, the trial judge rejected the evidence of the appellant that the respondent had misrepresented to it that electricity costs would continue to escalate and that the appellant would save money over the five-year term of the proposed fixed price contract. He rejected the evidence of the appellant that it was totally ignorant of the fixed price contract given its experience and sophistication.

Issue:

Did the trial judge err in his factual determination?

Holding: Appeal dismissed.

Reasoning:

No. The findings of a trial judge are entitled to deference, and absent palpable and overriding error the Court of Appeal will not intervene. Even if the respondent owed the appellant any duty of care, it was met in this case on the factual findings of the trial judge, which was supported by the evidence.

The issue in this appeal is the validity of a memorandum of agreement (MOA) that transfers ownership of a house from Sofia Denis (mother) to her daughter, Dimitra Georgopoulos, in exchange for $100,000.00 and a promise that the mother could remain living in the house for the rest of her life.

Soon after, the mother passed away unexpectedly. The transfer of the house reduced the inheritance of the mothers son, Christos Donis and other daughter Eleni.

The son challenged the validity of the transfer primarily on the basis that: (1) their mother’s rudimentary understanding of English prevented her from having the requisite capacity and understanding to execute the MOA; and (2) Dimitra exercised undue influence over her mother, who did not receive proper independent legal advice. The trial judge dismissed his challenge and Christos appeals.

Issues:

The appellant argues that the trial judge erred in finding that:

The mother understood the MOA and the MOA was not invalidated by the doctrine of non est factum;

Dimitra rebutted the presumption of undue influence;

The mother’s interests were protected by independent legal advice; and

The MOA was valid despite a failure of consideration.

Holding: Appeal Dismissed

Reasoning:

The court held that the factual findings of the trial judge were sufficient and there is no need to interfere with his findings. He found that: (1) the mother had sufficient ability in English to read and understand the MOA; (2) the mother had sufficient ability in English to understand the lawyer’s explanation of the content of the MOA; and (3) Dimitra provided her mother with an explanation of the content of the MOA in her native language.

The appellant argues that, in the alternative, if the mother understood the MOA, she only signed it as a result of Dimitra’s undue influence over her. The trial judge stated that there was sufficient evidence to raise the presumption of undue influence because Sofia was dependant on Dimitra for basic needs, she was in a relationship of trust and confidence. He went on, however, to find that Dimitra had rebutted the presumption of undue influence, as the mother received independent legal advice from a lawyer.

The appellant argued that the trial judge erred, stating that the MOA was invalid because there was a failure of consideration, as the mother died shortly after the MOA was signed and therefore never received the future care that she was contemplated by the MOA. The court rejected this argument, looking to the MOA which stated, “[t]he agreement did not provide that Dimitra could have the house for such a time as she continued to provide care to Sofia”. There was sufficient consideration for the MOA.

Appellant McDowell, commenced an action against the respondent Municipality and others asserting various causes of action, including negligence, intentional torts and breach of contract. McDowell claimed that the Municipality prevented him from obtaining approval of a plan of subdivision and limited his ability to sell his property. This action was eventually dismissed for delay under rule 24.01 of the Rules of Civil Procedure. The appellant appeals from that dismissal.

Issues:

(1) Did the motion judge err in finding that the appellant’s delay was inordinate and inexcusable?

(2) Did the motion judge err in finding a failure to rebut the presumption of prejudice and that actual prejudice existed?

(3) Did the motion judge fail to comply with responsibilities owed to self-represented parties?

(4) Did the motion judge err in failing to address the appellant’s cross-motion for the production of documents?

Holding: Appeal Dismissed

Reasoning:

(1) No. The motion judge found no evidence that the Municipality was the cause of any delay and that there was no substance to the appellant’s suggestion that the Municipality “laid in wait to pounce on the appellant.” The appellant was given numerous warnings. Thus the delay was inordinate and inexcusable, for which the appellant was responsible.

(2) No. Once inordinate and inexcusable delay is found, there is a presumption of prejudice: Armstrong v. McCall. The appellant failed to produce any convincing evidence to rebut the presumption and thus there was no need for a finding of actual prejudice, even if the motion judge concluded that actual prejudice existed.

(3) No. While the court system presents considerable challenges to self-represented parties, these parties have a responsibility to familiarize themselves with any procedures relevant to the case. This matter had an inordinate and prejudicial delay and the appellant’s conduct cannot be excused simply because he was self-represented.

(4) No. The appellant’s motion was served four days before the hearing and would be rendered moot if the dismissal for delay motion was granted. The motion judge’s adjournment was a discretionary decision and uninfected by any error.

Facts: Chaim Neuberger’s (“Mr. Neuberger”) long-standing intention was to leave his estate, worth over $100 million, equally to his two daughters Edie and Myra. The appellant, Edie, has five adult children, one of whom is the appellant, Adam Jesin-Neuberger (“Adam”). The respondent, Myra, has three adult children (the “York Parties”).

Mr. Neuberger executed primary and secondary wills in 2004 (the “2004 Wills”) and again in 2010 (the “2010 Wills”) with Edie and Myra named as co-estate trustees. Both sets of wills left his estate to Edie and Myra and their children. However, the two wills allegedly differ in a manner that results in Myra’s share exceeding Edie’s by approximately $13 million.

Edie took a number of steps in her capacity as co-estate trustee under the 2010 Wills and ultimately commenced legal proceedings to challenge the validity of the 2010 Wills on the basis that her father did not have the testamentary capacity when he executed them. Adam, through separate legal representation, seeks to challenge the validity of the 2010 Wills. Together, Edie and Adam’s proceedings are referred to as the “Wills Challenges”. In response, the York Parties moved to dismiss the Wills Challenges on the basis that they are barred by the equitable doctrines of estoppel by representation and estoppel by convention.

The motion judge granted the motion to dismiss the Wills Challenges. She found that Adam was a “straw man” who had no knowledge of the 2010 Wills or the estate and came forward only to support his mother’s position in the litigation. The motion judge found that Edie was estopped from challenging the validity of the 2010 Wills on the following basis: she had delayed bringing her challenge without explanation despite having doubts of Mr. Neuberger’s capacity prior to 2011; Edie undertook actions as an estate trustee in which she held herself out as such to various professionals; and the prejudice that would ensue from having to unwind the estate freeze that would cause the respondents to suffer as a result of having taken steps based on the 2010 Wills. Edie and Adam appealed from the dismissal of their Wills Challenges.

Issues: (1) Is there an automatic right to proof in solemn form pre-probate? (2) Did the motion judge err in her analysis of Edie’s right to challenge the 2010 wills? (3)Did the motion judge err in barring the Wills Challenges based on estoppel? (4) Did the motion judge err by failing to take into account the relevant policy considerations?(5) Did the motion judge err in barring Adam from pursuing his wills challenge because he is a “straw man”? (6) Did the motion judge err in her factual findings in respect of Adam?

Holding: Appeal allowed.

Reasoning: (1) No. Edie and Adam are Interested Persons under Rule 75.06(1) of the Rules of Civil Procedure. As a general principle, before probate issues, an Interested Person has the right under rules 75.01 and 75.06 to request formal proof of the testamentary instrument, however they do not have, as of right, the ability to require that the testamentary instrument be proved in solemn form.

Flowing from the wording of rule 75.01, an Interested Person does not have the right to compel proof in solemn form. Rather, they can make an application for it to be “proved in such manner as the court directs” and it must be considered in conjunction with rule 75.06 because the application must be brought under that rule. When read together, rules 75.01 and 75.06 give the court discretion over whether a testamentary instrument is to be proved and the manner in which the instrument is proved.

In addition, an Interested Party must meet a minimal evidentiary threshold before a court should grant a request that a testamentary instrument be proved. In small estates, needless litigation could deplete the estate. An applicant or moving party under 75.06 must adduce some evidence which, if accepted, would call into question the testamentary instrument that is being propounded.

(2) No. Rules 75.04 and 75.05 apply to wills challenges where probate has already issued and the court must decide whether to revoke or return the certificate. In the current case, probate has never been granted. Edie argued that the motion judge conflated the legal tests in relation to Rules 75.04 and 75.05 with the test to be applied under Rule 75.01 where probate had never been granted. The court agreed with the argument of the York Parties that this issue was a “red herring” because the sole task was to decide whether the doctrine of estoppel applied to preclude the Wills Challenges from proceeding.

(3) Yes. The motion judge erred in finding that estoppel by representation and convention can bar a challenge to the validity of a will. The motion judge erred in relying on a jurisprudential basis for her finding. The motion judge relied on the following three cases as the basis to invoke estoppel to bar the Wills Challenges: Canadian Superior Oil Ltd. v. PaddonHughes Development Co., [1970] S.C.R. 932; Ryan v. Moore, 2005 SCC 38; and, Leibel v. Leibel, 2014 ONSC 4516.

The court held that neither Canadian Superior Oil nor Ryan were relevant to the issue at hand and that the judge in Liebel erred in relying on the aforementioned cases. In Leibel, the motion judge found that there were discoverability issues and that the party seeking to challenge to the validity of the wills was statute-barred. In this case, the motion judge erred in finding the application was statute-barred and she mistakenly relied on Canadian Superior Oil and Ryan as authority for the proposition that estoppel applies to the question of whether an interested person should be permitted to proceed with a challenge to the validity of a will.

(4) Yes. The court has a responsibility to ensure that only wills that meet the hallmarks of validity are probated. The court also has a duty to the testator whose death precludes them from protecting their own interests, and to those with a legitimate interest in the estate and to the public at large. The court’s ability to discharge these duties would be jeopardized if the doctrine of estoppel was available to prohibit a party from having the validity of a will determined.

The court agreed with Edie’s submission that the motion judge’s reliance on Edie’s undue delay as a basis for her decision created a bad precedent that could adversely affect the administration of estates and had to be set aside for policy reasons. The motion judge’s decision in this case could result in parties bringing premature and potentially poorly informed challenges or force trustees to take no steps in the administration of estates for fear of being deemed unduly dilatory or as having affirmed the validity of the will. The court found no basis to import the doctrine of estoppel into Rule 75. Rule 75 gives the court enough discretion to screen out baseless claims for formal proof of testamentary instruments and, for those with merit, control the manner in which the instrument is proved.

(5) Yes. It is not clear the basis for the motion judge finding that Adam was a “straw man”. Adam provided evidence that he made an independent decision to challenge the 2010 Wills and Edie’s evidence was that she did not want her children to be involved. Neither of their evidence was disturbed on cross-examination. The motion judge was required to provide an explanation as to why she rejected Adam’s evidence.

(6) Yes. The motion judge made findings of fact in relation to Adam’s claim in a conclusory fashion and did not explain how she weighed conflicting evidence and credibility disputes. First, there was no basis for the motion judge’s finding that Adam did not have a close relationship with his grandfather. Second, the motion judge must have misapprehended the evidence in finding that Adam had not explained why he brought his will challenge. Adam’s evidence was that he was content to have his mother pursue the validity of the 2010 Wills without his involvement until January 2014, when he learned the York Parties were intending to bring a motion to strike his mother’s wills challenge. As a result of the motion to strike, Adam felt his interests might not be protected. It is not clear based on Adam’s evidence how the motion judge came to the conclusion that he gave no explanation for why he challenged the will.

In the result, the dismissal of the Wills Challenges was set aside and the Wills Challenges are permitted to proceed on the merits.

Suzan Labelle (the “Appellant”) allegedly slipped and fell at a border crossing in Ontario. She commenced a claim against the Canada Border Services Agency (“CBSA”), Abitibi Consolidated Inc. (“Abitibi”) and International Bridge Company (“International Bridge”) (collectively the “Respondents”). Abitibi and International Bridge were subject to an order under the Companies’ Creditors Arrangement Act, so the claims against them were automatically stayed.

The claim moved very slowly until March 2012, when the court issued a status notice. Although the Appellant’s counsel instructed staff to do so, they failed to request a status hearing from the court. The registrar dismissed the Appellants’ action in June 2012. Appellant’s counsel promptly obtained the Respondents’ position that they would not oppose the motion to set aside the dismissal order. More than two years passed before the Appellant’s counsel brought the motion. The motion judge refused to set aside the dismissal order because the Respondents were prejudiced by the delay. The Appellant appeals.

Issue: Did the motion judge err in her assessment of prejudice to the Respondents?

Holding: Appeal allowed.

Reasoning:

Yes. The motion judge erred in her assessment, which was at the heart of her decision to dismiss the Appellants’ motion.

The motion judge applied the circumstances of the case as outlined in Reid v Dow Corning Corp: explanation of the litigation delay; inadvertence in missing the deadline set out in the status notice; promptly moving to set aside the registrar’s dismissal order; and no substantial prejudice to the respondents because of the delay. The motion judge correctly observed that it was not mandatory that the Appellant satisfy all four factors. The motion judge listed the Appellant’s reasons for the litigation delay and failure to promptly move to set aside the dismissal order.

The motion judge concluded the motion ought to be dismissed because the Appellant’s delay caused significant prejudice to the Respondents. The Respondents were prejudiced because the crossclaim against Abitibi disappeared and the Respondents lost the ability to defend themselves because evidence regarding maintenance was no longer available.

Prejudice to the defence that exists regardless of the Appellant’s delay is not relevant. Prejudice arising from the defendants’ own failure to do something that they reasonably could have or ought to have done such as interviewing witnesses and conducting surveillance cannot be the basis for refusing to revive a claim that was administratively dismissed for delay. The Respondents failed to take any steps to preserve or pursue any claims that they may have had against Abitibi or International Bridge in the CCAA proceedings. The unavailability of evidence regarding maintenance was not a product of the Appellant’s delay.

The motion judge’s conclusion regarding prejudice was central to her decision to dismiss the Appellants’ motion. Without the finding of prejudice to the Respondents, a contextual analysis would result in concluding that the order ought to be set aside. The factor of delay by itself is not sufficient to deny the Appellant’s request to reinstate the action. Also, there is no evidence that the Appellant’s delay was the product of a deliberate decision not to take any steps in the proceedings.

Facts: The deceased, Eric Spence (“Eric”), was survived by his daughter, the respondent Verolin Spence (“Verolin”). According to Verolin, she and her father enjoyed a positive relationship for many years. However, their relationship changed in 2002 when she told Eric that she was pregnant. Verolin says that Eric, a black man, began to restrict his communications and any other contact with her when he learned that the father of her child was white. Verolin gave birth to her son A.S. in 2003. Eric made a will in 2010 in which he expressly excluded Verolin from sharing in any part of his estate.

Eric passed away and the appellant, BMO Trust Company (“BMO Trust”), was issued a Certificate of Appointment of Estate Trustee with a Will in 2013 and began to administer the estate. Verolin and A.S. did not challenge the Will or BMO Trust’s appointment as estate trustee in the probate proceeding. Instead, in 2014, they applied in the Superior Court under rule 75.06 of the Rules of Civil Procedure, and ss. 58 and 60 of the Succession Law Reform Act (the “SLRA”) for: i) a declaration that the Will was void, in whole or in part, because it was contrary to public policy; ii) leave to proceed with a dependant’s relief application under the SLRA; and iii) directions from the court.

In support of the application, Verolin filed her own affidavit, together with an affidavit sworn by Imogene Parchment (“Imogene”), who had acted as Eric’s occasional caregiver. In both affidavits (the “Extrinsic Evidence”), the affiants alleged that Eric’s decision to exclude Verolin and A.S. from his Will was racially-motivated. Verolin asserted that, because her disinheritance was motivated by racial discrimination on Eric’s part, the Will was void by reason of public policy. The application judge set aside the Will on the basis that it violated public policy against discrimination on racial grounds. BMO Trust appeals the application judge’s decision.

Issues:

(1) Was the Extrinsic Evidence admissible before the application judge?

(2) Did the application judge err by improperly interfering with Eric’s testamentary freedom?

Holding: Appeal allowed.

Reasoning:

(1) No. As a general rule, extrinsic evidence of a testator’s intentions is not admissible when the testator’s will is clear and unambiguous on its face. In Rondel v. Robinson Estate, this court recognized two exceptions to this rule. First, direct extrinsic evidence of intention may be admissible where a will is equivocal, that is, where the words used in the will may be read as applying equally to two or more persons or things. Second, evidence of the testator’s circumstances or the circumstances surrounding the formation of a will may also be admissible in cases where the will is or may be ambiguous. This is not a wills interpretation case and the application judge was not sitting as a court of construction. Here, it is accepted that the terms of the Will are unambiguous and unequivocal. Consequently, the established exceptions to the general exclusionary rule regarding evidence of a testator’s intentions are not engaged.

It need hardly be said that public policy in Canada precludes discrimination on the basis of race and other discriminatory characteristics. The public policy against discrimination is reflected in the Charter and the human rights legislation of every province in Canada, including Ontario’s Human Rights Code. However, the desirability of affirming the public policy against discrimination does not lead to the conclusion that third-party extrinsic evidence of a testator’s alleged discriminatory motive is admissible to challenge the validity of a will where, as here, the testator’s residual bequest to a private beneficiary is absolute, unequivocal and unambiguous. If, as Rondel holds, extrinsic evidence is not admissible to establish what a testator intended, still less should it be admissible to question why the testator made a particular bequest. In this case, the Will expressly discloses Eric’s motive, at clause 5(h). That clause provides an explanation, from the testator himself, for his decision to exclude Verolin from the Will, namely, that “she has had no communication with me for several years and has shown no interest in me as her father”. Viewed in this fashion, the purpose of the Extrinsic Evidence was not to establish Eric’s motive for the residual bequest in his Will but, rather, to contradict the lawful motive for the bequest disclosed by the plain language of the Will and to substitute, in its stead, a different and allegedly unlawful motive. There is no basis at law for the admission of wholly contradictory, extrinsic evidence of motive for this purpose. The courts should be loath to sanction such an indirect attack, which the deceased cannot challenge, on a testator’s expressed motive and testamentary choices.

(2) Yes. Judicial interference with Eric’s testamentary freedom was not warranted. A testator’s freedom to distribute his property as he chooses is a deeply entrenched common law principle. The Supreme Court has also recognized the importance of testamentary autonomy in Tataryn v. Tataryn Estate. However, notwithstanding the robust nature of the principle of testamentary freedom and its salutary social interest dimensions, the courts have recognized that it is not an absolute right. Apart from limits imposed by legislation, it may also be constrained by public policy considerations in some circumstances. Canada Trust Co. v. Ontario (Human Rights Commission, where the discriminatory terms of a trust were found to be contrary to public policy, is instructive in this regard. However, in this case, the Will at clause 5(h) that no provision was made for Verolin because “she has had no communication with me for several years and has shown no interest in me as a father” was not the language of racial discrimination. Canada Trust confirms that Canadian courts will not hesitate to intervene on the grounds of public policy where implementation of a testator’s wishes requires a testator’s executors or trustees or a named beneficiary to act in a way that collides with public policy. That is not this case. To apply the public policy doctrine to void an unconditional and unequivocal testamentary bequest in cases where, as here, a disappointed potential heir has been disinherited absolutely in favour of a different, worthy heir, would effect a material and unwarranted expansion of the public policy doctrine in estates law. Absent valid legislative provision to the contrary, or legally offensive conditional terms in the will itself, the desire to guard against a testator’s unsavoury or distasteful testamentary dispositions cannot be allowed to overtake testamentary freedom. The need for a robust application of the principle of testamentary freedom is especially important in the context of a testator’s central right to choose his or her residual beneficiaries. On the facts of this case, there was no foundation for the public policy-driven review undertaken by the application judge. She erred by going behind the testator’s expression of his clear intentions regarding the disposition of his property. The application judge’s decision in this case implicitly endorses a general supervisory role for the courts in policing a testator’s unqualified and legitimate choice of his or her heirs on the ground of enforcing the public policy against discrimination. This proposition, if accepted, would significantly erode and arguably displace meaningful testamentary freedom.

The appellants (“Appellants”) agreed to sell certain properties to the respondents (“Respondents”). The parties entered an agreement of purchase and sale in 2014. The purchase price was $36,000,000 and included a $2,000,000 deposit. Part of the purchase price included the Respondent’s assumption of two existing mortgages on the properties. There were two related clauses in the agreement. A Rider required the respondent to proceed in good faith and with due diligence. If the Respondent fulfilled this obligation, it was entitled to determine whether the terms of the mortgages were acceptable and, if not, to back away from the deal.

The Respondent did not agree to the mortgages’ conditions and backed out of the agreement. The Appellants refused to return the deposit. The parties agreed to have the dispute settled by summary judgment. The Respondent won the motion and the Appellants appealed the decision on the grounds that the motion judge’s interpretation of the agreement was an error of law.

Issue: Was the motion judge’s interpretation of the agreement incorrect?

Holding: Appeal dismissed

Reasoning:

No. Contractual interpretation involves issues of mixed fact and law and courts should be cautious in identifying extricable questions of law in interpretive disputes.

The Appellants argued that the motion judge did not interpret the Rider in the context of the factual matrix, including the Rider’s wording. The court did not accept this argument. The Appellants relied on the parties’ negotiations and subjective intent, which was not relevant to interpreting the agreement.

The Appellants also argued that the motion judge erred by failing to interpret the Rider as a whole by failing to interpret specific language. However, the motion judge did interpret the language which was evident by his referral to the Respondent’s obligation regarding the mortgages.

The motion judge was of the view that the Respondent acted in good faith and the evidence supported it. This finding was open to the motion judge to make and he did so by interpreting a witness’s evidence as a whole.

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